The Dynamic Interplay between Agency Costs and Whistleblowing: Evidence from West African Banks

Agency issues have been a significant issue of governance in banks, particularly in the emerging economies where information asymmetry and ineffective monitoring mechanisms allow managerial opportunism. In West Africa, banking crises are common and are associated with excessive insider lending, ineffective board supervision and internal controls, which highlights the importance of more effective governance mechanisms. This paper examines the two-way relationship between the agency costs (AGC) and whistleblowing (WBH) in listed banks in Nigeria and Ghana. The analysis is based on panel data from 2017-2024 and a two-step System GMM, which adjusts the endogeneity and dynamic effects and estimates the impact of the variables on each other. Findings indicate that WBH (z= -7.46, p < 0.05) had an adverse effect on AGC while AGC (z= 3.10, p < 0.05) had positive and significant influence on WBH, and thus, the relationship between whistleblowing and agency costs have dynamic feedback: managerial opportunism leads to whistleblowing, and effective whistleblowing channels restrain agency problems. The study provides new information in enhancing governance and transparency in emerging-market banks by placing the concept of whistleblowing as a response to and deterrent of agency problems in a comparative West African setting.